Finding the ‘State of the South’

MDC has studied the South for 40 years. The North Carolina think tank tells us what directions the region should be pointed.

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Editor’s Note:MDC Inc. has been studying economic development, poverty and education in the American South for more than four decades. Every few years, it publishes The State of the South, MDC’s assessment of the region. The following is an excerpt from the latest State of the South report. The full version can be found here.

Even in an era of metropolitan muscle, the small-town South has not gone away. The U.S. Economic Research Service points out that four out of ten U.S. non-metro residents live in the South.

Some rural areas have experienced population and employment growth, albeit much less robust than metro areas. And yet, with near-term job-growth prospects soft and the flow of government assistance in jeopardy, rural communities face daunting prospects in gearing themselves for a recovery.

As the Economic Research Service chart here shows, the South’s non-metro poverty rate far exceeds rural poverty in other U.S. regions. In addition, says the ERS report, “The non-metro and metro poverty rate gap for the South has historically been the largest. This trend continued in 2009 (5.5 percentage points) with a 1.1 percentage point increase from 2008 (4.4 percentage points).”

With government transfer payments accounting for more than 22 percent of rural residents’ income, cuts in medical and social services will come as a knock-the-wind-out blow to poor rural communities in the South.

For towns within relatively short commuting distance to metropolitan areas, the recessions of the past decade have intensified the imperative to build stronger connections to the metro job markets. For some rural regions, the future may well revolve around a purposeful strategy—assisted by state governments—of focusing on small cities, especially those with universities, such as Greenville, N.C., and Lafayette, La., as hubs for regional development.

Time-worn barriers to community collaborations remain throughout our rural regions. And yet, in a period of massive budget-cutting, small towns and counties will find themselves needing to forge regional partnerships across old lines of rivalry to address economic, educational, and social inequalities and inequities.

Guidance by a ‘North Star’

The metaphor of “iron triangles’’ has long been used to explain the making of public policy and government budgets.

It describes the threesided interplay of 1) government agencies that identify needs and run programs to address them, 2) advocacy and lobbying organizations that bring information and analysis to the table in representing corporate and societal groups, and 3) legislative committees with legislators and staffs who specialize in particular topics and segments of government.

No doubt, as governments across the South complete their 2010-11 fiscal years and prepare budgets for 2011-12, we will witness intense struggles over recession-drained resources, with trade-offs, brokered-deals, and power-plays in the agency-legislative-advocacy triangles of our states and communities.

Before brutal budgeting breaks out, we offer an alternative metaphor to guide policy makers as they engage in the setting of priorities—that is, the unavoidable tasks of determining where and how much to cut, where and how much to spend, where and how much to tax. We propose that the South’s governments set for themselves a “North Star’’ on which to fix their sights in budgeting. In other words, drive budgeting not simply by this trade-off or that deal, but even more by a set of broad standards and on-the-horizon goals.

We would define a “North Star’’ for the South as the fostering of thriving states and communities committed to an alternative triangle: equity, opportunity, and economic competitiveness. Let’s be clear: This isn’t a call for some sort of pure equality of outcomes; a democratic, capitalist society doesn’t produce such results. Still, guidance by this definition of a “North Star’’ would impel governors, legislators, and other policy makers to assess budgetary decisions by whether they would narrow inequities, create opportunities, enhance mutual regard, and generally widen the circle of success and wellbeing.

No less an analyst of our economic state of affairs than Ben Bernanke, chair of the Federal Reserve Board, addressed himself to the deleterious effects of income inequality in a recent network TV interview. Asked to comment on what it says about America that the nation has the “biggest income disparity gap of any industrialized country in the world,” Bernanke, a native of rural South Carolina, responded, “It’s a very bad development. It’s creating two societies. And it’s based very much, I think, on educational differences… If you’re a college graduate, unemployment is 5 percent. If you’re a high school graduate, it’s 10 percent or more. It’s a very big difference. It leads to an unequal society, and a society which doesn’t have the cohesion that we’d like to see.”

Of course, much of the responsibility for mitigating “an unequal society’’ falls to the national government, and its powerful tax and fiscal policies. Still, in our federal system, states and local governments have their own powers and responsibilities that can be exercised to narrow gaps, widen opportunities, enhance competitiveness and promote equity. In the wake of an economic downturn as well as natural disasters, a natural impulse emerges: to strive to get back to “normal’’ as quickly as possible. And yet, even in today’s dynamic South, “normal’’ means too many people out of work, under-employed, and trying to make ends meet in occupations that afford little upward mobility.

“Normal’’ hasn’t been working for too many of us. The concept of guidance by a “North Star’’ allows for the posing of pointed questions that stimulate conversation beyond the immediate impulse:

• Toward what outcomes are we aiming, and what outcomes are fundamental to the post-recession health of our society? As they wrestle with difficult choices, policy makers should decide on the basis of clear analysis of outcomes: competitiveness of people and places, closing debilitating performance gaps, keeping open opportunities for career advancement.

• What do we need to create? The nation put people to work and built lasting things—scenic roads, landmark buildings—during the Great Depression. Even amid today’s austerity, could not states dedicate a pot of money with a dual purpose of creating jobs and improving our physical public assets?

• What “seed corn’’ do we need to plant today? Policy makers can learn from history what actions of an earlier generation—for example, creation of community colleges, development of Research Triangle Park in North Carolina—produced pay-offs and how those lessons might apply today. The challenge is not to return to an unsatisfactory “normal” but to set in motion policies and plans for transformation as recovery proceeds.

• What past gains can we not afford to sacrifice as we build for the future?

• Also, how do we not simply salvage what we can, but reset our course? Just as forward-looking private companies are thinking and acting in new ways to attract talent, so can government agencies and education institutions use this period to develop strategies for both recruiting talent and home-growing talent.

• As lawmakers consider both tax and budget policies, ask not only who wins and who loses, but also does this provision or that item widen gaps or close gaps? Does this budget or that tax plan respond to the changing faces and economic landscape of the South?